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Turning Around Distressed Properties

Turning Around Distressed Properties . 2010 North Carolina Affordable Housing Conference September 17, 2010 Frankie W. Pendergraph, The Pendergraph Companies. What to do? . Drop a Bomb Light some Matches Pray for a Flood Start a War Turn in the keys Hide out in the Caribbean

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Turning Around Distressed Properties

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  1. Turning Around Distressed Properties 2010 North Carolina Affordable Housing Conference September 17, 2010 Frankie W. Pendergraph, The Pendergraph Companies

  2. What to do? • Drop a Bomb • Light some Matches • Pray for a Flood • Start a War • Turn in the keys • Hide out in the Caribbean • That might be what you want to do but we all know you can’t do that.

  3. What is the problem? • Figure out what you are dealing with. • Financial Distress, Physical Distress or Both? • Loan to Value – Rightsizing • Compliance Problems? • Are you in Technical Default? • Are you in Actual Full Blown Default? • Is your lender the same that you started with? • Read your loan, equity and agency documents!

  4. What is the problem? • Have you been served any legal notices? • Are you speaking daily with the IRS? • Has the neighborhood gone downhill? • Are you the reason the neighborhood has gone downhill? • Has a new property been built in your back yard? • Are you in a high insurance area? • Do you need to fire the management company?

  5. Assessing the Situation • Assess the problem – look at everything • Visit the property • Review all documents • Look at everything as if it was the first time you have seen it • Ask an independent 3rd party to check behind you • Temporary Problem or Permanent Problem?

  6. Possible Fixes • Loan Restructuring, Modification, New Loan • New Site Staff • New Management Company • New Tenants - clean house • Can the property be sold? • Can you give the property away? • Can you have someone step into your shoes as the general partner?

  7. Possible Fixes • “You have to spend money to make money” • May have to put money in to turn units to get tenants in the door • Make sure property is valued correctly for tax purposes • Is soft money available? • Fix all physical problems as best you can • Do everything that you can do, but…

  8. Possible Fixes • Communicate with your lenders and investors. You are not the only one with this problem. • The old school of thought was that the syndicator would bail you out. That is not the case anymore. But they can and probably will be helpful.

  9. Solutions • Everyone put your keys in a hat • Put it on Craigslist • Maybe your tenants will sue you and they will own the property and they can deal with these issues • There is no easy fix. It will entail lots of attention and hard work. • You cannot expect a 3rd party management company who is being paid a $25,000 management fee to solve the problem. You as the owner must step up.

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